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CorporationsCompliance
a year ago

Automate your Rule 701 Compliance on Carta

Sending 701 Disclosures is now seamlessly integrated into the issuance process on Carta. After drafting shares, a company can quickly run a report to check whether a 701 disclosure is required. If they are, they can upload and securely send to both new and existing stakeholders without leaving the app. 

What is a 701 Disclosure? Am I required to send them? 

A 701 Disclosure is a notice you may need to send to employees and investors if your company wants to sell or issue more than $10 million in securities within a 12-month period. This includes employees and other service providers who will be receiving equity in your company. They must be given the chance to review the disclosures before the purchase decision (or acceptance of an equity award) is made. You can read more about Rule 701 and how it applies to your company here. 

Companies can use Carta’s compliance features to check if they are required to send 701 Disclosures before issuing securities. Go to Essentials > Run reports to find the 701 report to check whether you meet this requirement.

Who is this available for? 

Companies in Scale. If you would like to upgrade your subscription to include Rule 701 Compliance, talk to your Account Manager or schedule a demo. 

How does it work? 

  1. After drafting RSUs, click Add RSUs to the ledger.
  2. Next, you will be prompted to either run a 701 report or begin preparing the 701 Disclosure without running a report. Running a 701 report will let you know if you are required to send 701 disclosures before issuing these RSUs. 

    1. NOTE: Clicking Prepare 701 disclosure does not trigger an email to your recipients or company signatories. 
  3. After clicking Prepare 701 disclosure, you will be taken to the Communication Center,  where you can prepare a message and attach a disclosure PDF. Click Next: Choose recipients or Click Save Draft to save this draft for another time. 

    1. If you save your draft, Carta will add a reminder to the top RSU ledger. Click Draft Rule 701 disclosure on your RSU ledger to continue working on this disclosure.
  4. Carta automatically includes all  RSU recipients of your drafted RSUs. Additional recipients can be selected from the table on the left, if applicable. To proceed, click Next.
  5. Review the message and recipient list. If everything looks good, click Send communication.
  6. Recipients will be able to access the disclosure from their Carta inbox as well as via email. 
  7. Once all recipients have received this disclosure, Carta automatically sends RSUs to your company signatories.
  8. As soon as signatories sign the RSUs, holders will receive them.

What will recipients see? 

Once a 701 Disclosure has been sent, recipients will receive the following email. This communication will be sent to the stakeholder’s Contact Email on file. 

How can I trust that these disclosures are sent securely? 

All disclosures will be watermarked individually. These documents will be shared with recipients directly in Carta, not over email. Your recipients will be blocked from downloading the document, and any admins on your account will see who opened the disclosure and when. Admins will also have access to analytics to see which pages of the disclosure each recipient spent the most time on. 

Can I resend a 701 Disclosure to a recipient? 

You cannot resend a 701 Disclosure in the app. If you need to resend a 701 Disclosure for any reason, contact Carta’s support team for assistance. 

Avatar of authorAlana Lindall